Why tech's Famous Five want to own you

Joshua Gliddon and Mark Jones

Meet technology's Famous Five. They've risen above the pack of global technology players, and they want to own you. They're aggressive, innovative and have everything to lose.

They are Apple, Google, Microsoft, Facebook and Amazon.

At first glance it seems like a motley crew. Each is famous for different things: Apple's engineering beauty and simplicity; Google's powerful search; Microsoft's sheer muscle; Facebook's social media dominance; and Amazon's quest to reinvent retail.

Yet each of these companies is chasing a common goal that few beyond their circle have mastered.

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In a world spoilt for diversity and choice, this vision is almost counter-intuitive. They're turning complexity into simplicity, or in technical terms, want to give consumers access to a single, integrated digital platform that spans your entire computing experience.

At a technical level, each company is on a mission to unite the universe of mobile devices, PCs, digital content, operating systems, and online platforms.

In business terms there's a very clear objective. The smartest company, with the simplest platform that ties together your digital world, wins.

Why? In part, the Famous Five have realised they have little choice. Apple's already proved it's possible to provide a single customer experience across its hardware devices, content and online platforms.

This is the same company once criticised by Microsoft and the open source movement for pushing customers into a closed, tightly controlled computing environment. Today, it's famously laughing all the way to the bank.

Apple's latest quarterly earnings announcement underscores the point. Over the course of just three months the company booked profits of $US8.8bn on revenues of $US35bn, up from $US28bn the previous quarter.

There are many reasons why Apple's churning in so much cash. But chief among them is the runaway success of it's closed ecosystem.

It's got to the point where the other members of the Big Five – Microsoft, Google, Amazon and Facebook – simply can't avoid following some aspects of Apple's strategy.

In our view, the most compelling aspect of Apple's ability to lock customers into one platform is the company's ability to virtually own you for life.

Defecting from Apple's iCloud platform, which houses all your digital content, and neatly synchronises it across multiple devices, is possible. But it's not easy.

Moving to, say, Google or Microsoft potentially means leaving your digital content behind and starting anew with the upfront cost of new devices and the hassle of setting up new digital profiles. Not impossible, but not easy if you're not technically minded.

Viva la difference

In this world of content lock-in it would be tempting to conclude each of the Famous Five have the same end game: music, videos and mobile apps sales.

But as Sydney-based futurist Ross Dawson observes, “iTunes revenue is a small overall part of Apple's revenue. But it's a large part of the value provided to the customer.”

That intangible value built around the entertainment and content experience has a commercial reality, namely it drives increasing demand for more sales of high-margin hardware: iPhones, iPads, Macbooks and Apple TVs to name a few.

Importantly, this dynamic is not the same for other members of the Famous Five.

Google's motivation is famously different. Despite its latest attempts to crack the hardware market with the much-hyped Nexus 7 tablet, or the content market with the Google Play app store, Google remains at its core an advertising company.

Facebook ultimately isn't too much different. CEO Mark Zuckerberg admitted during the company's first ever earnings call that advertising was a key priority: “That's why we're so focused on investing in our priorities of mobile, platform and social ads to help people have these experiences with their friends.” At the same time, he played down persistent rumours of a Facebook phone. Time will tell, but if it happens it will likely stand as yet another advertising platform.

Beyond that, Facebook will continue its own form of online lock-in by using your Facebook login details as a single sign-on system for access to other services. For example, Spotify, the world's leading music subscription service, requires a Facebook login to function. The same goes for games such as Zynga's Draw Something and Farmville.

So where does that leave Microsoft and Amazon?

Tricky tablets

Microsoft founder Bill Gates famously spruiked tablets as the future of computing more than a decade ago. The problem was at the time no-one wanted, or even understood, tablet computers. Microsoft's approach was clunky, and in simple terms, offered only a minor leap forward in user interface design. Window's was tweaked to include support for a hand-held stylus.

Apple's iPad provided the real breakthrough by using the humble human finger as a better pointing device. Simple gestures such as swiping and pinching gave consumers their ah-ha! moment, and tablet computing finally took off.

It was a galling development for Microsoft, which has struggled to bridge the divide between the desktop and mobile computing worlds. It's Windows Phone 7 market share remains low despite the fact the operating system is generally well regarded.

“Microsoft is trying hard,” says Mark Pesce, a technologist also based in Sydney. “It's trying to bring the app economy to the desktop with its Windows 8 strategy.

“The real question, however, is whether the desktop is going to matter in a couple of years.”

And that's Microsoft's challenge. It must succeed on all fronts: keep both its Windows and Office franchise alive and catch up to Apple in terms of hardware sales.

“Microsoft needed to come up with a fantastic piece of hardware to help sell its ecosystem,” says Mr Dawson. “Today you have to have all the elements come together to create a compelling strategy.”

Over at Amazon, hardware is also on the agenda. The Kindle Fire is a tablet device that runs a customised version of Google's Android. Strategically, it's a window into Amazon's massive content library of ebooks, magazines, movies, and music.

The approach mirrors that of the other Famous Five. Lock a consumer into the Kindle ecosystem, Amazon's customer will now store their music on Amazon's servers, watch its movies, and read its ebooks. Unfortunately you can't get the Kindle Fire in Australia (through official channels) and the content library, like Google's, is for North American customers. The question is how long that status quo will remain before it taps global markets.

What's next?

Looking ahead, these Famous Five will wage a sustained battle for your heart and wallet. Like their TV Series namesakes, there are plenty more mysteries and adventures ahead.

We'll resist picking a winner because each company has the potential to claw back Apple's lead when it comes to an integrated customer experience.

What is clear, however, are the iconic mobile companies omitted from our analysis. Nokia, a mobile iconic has abandoned its own platform for Windows. Samsung lacks a broader platform strategy and depends on Google's Android operating system.

Sony is virtually forgotten after its failed mobile partnership with Ericsson. And then there's RIM and the famous Blackberry. RIM's app ecosystem is sparse, and its famed secure email system has become a standard feature on most business smartphones.

From a consumer perspective, there are only so many famous characters you can entertain at once.

Josh Gliddon (@joshglid) and Mark Jones (@markhjones) are senior journalists at Filtered Media and both previously served as IT Editors at The Australian Financial Review.